As investors panic, CEOs vote with their wallets for local companies - Corporate executives are quietly scooping up thousands of shares of their own companies at what they see as bargain-basement prices. - Stock purchases by corporate insiders increasing

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Corporate America believes in the Good Future of the American Economy. The Selling Panic is a Mass Psychological Phenomenon with no basis on the Economic Fundamentals.

Washington Post -
As investors panic, CEOs vote with their wallets for local companies -
By Cezary Podkul -
Tuesday, August 23, 2011


As investors panic, CEOs vote with their wallets for local companies

Some excerpts :

As investors dump stocks and mutual funds because of fears of global recession, “It got so ridiculously low that it was an investment opportunity that was hard to pass up,” said Stanley Erck, who runs Novavax, a Rockville-based vaccine maker. Two weeks ago, he helped himself to 50,000 shares of the company after the market hammered the price down 30 percent, to $1.24 per share.

Aug. 23 (Bloomberg) -- Adrian Foster, head of financial-market research for Asia at Rabobank Groep NV in Hong Kong, talks about the global economy, financial markets and Federal Reserve monetary policy.

Across the country, thousands of corporate insiders, including dozens in the Washington area, have taken this month’s panic selling as an opportunity to buy nearly $2 billion worth of their shares at the lower prices. Experts say the massive buying volume may be a sign that chief executives don’t think the economy is as bad as investors fear.

“They are really buying the shares of their companies in a big way,” said Nejat Seyhun, a finance professor at the University of Michigan and author of “Investment Intelligence From Insider Trading,” a book that tracks decades of trades by corporate insiders.

During normal times, insiders selling shares tend to outpace buys by a 2-to-1 ratio, Seyhun said. But this month, markets have seen a complete inversion, with nearly two buys for each sell, according to data Seyhun compiled for The Washington Post.

The reversal is a “very bullish” signal for the market, Seyhun said, and could indicate a market bottom. Surges in stock purchases by corporate insiders helped spot market bottoms after the 1987 stock market crash and the financial crisis of 2008, he said.

This predictive power stems from corporate insiders’ ability to often better gauge what’s ahead for their companies than outside investors and analysts. When the price dips below a certain point and they swoop in to buy shares, it can signal the market is too pessimistic on companies’ future profitability.

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